Question

A company must decide which type of machine to buy, and how many units of that type, given the following information: Type Cost 1 ......... $ 10,0002 ......... 14,000Product demand and processing times for the equipment are:

a. How many machines of each type would be required to handle demand if the machines will operate 8 hours a day, 250 days a year, and what annual capacity cushion in processing time would result for each? b. With high certainty of annual demand, which type of machine would be chosen if that was an important consideration? With low certainty, which type of machine would be chosen? c. If purchasing and operating costs are taken into account, which type of machine would minimize total costs, given your answer for part a? Operating costs are $ 6/ hr for type 1 and $5/ hr for type 2.